High Yield Bonds
High Yield Bonds can offer substantial coupons when appropriately selected
High Yield Bond Strategy
High Yield Bond Strategy
The High Yield bond market is one the largest and most liquid opportunities within corporate credit. High Yield bonds are instruments issued by corporations with a credit rating of Ba1/BB+ or lower, as assigned by one of the three major credit rating agencies. The Global High Yield bond market is a large, diversified opportunity set with well over $2 Trillion outstanding and more than 1,500 issuing companies ranging from large multi-national, household names to small-to-medium sized businesses focused on local markets. Issuers of High Yield bonds tend to have higher sensitivity to the business cycle and as a result, typically pay a significantly higher rate of interest to investors compared to other fixed income assets, such as Investment Grade and Government Bonds.
High Yield bonds can offer an attractive total and relative returns. The High Yield bond market, while carrying greater risk of default than Investment Grade, possesses a number of qualities that allow it to play an important role in a diversified portfolio, including:
- High Current Income
- Capital Appreciation
- Strong Risk Adjusted Returns
- Low Duration
- Diversification Benefits
Alcentra specialises in Developed Market High Yield including US, European and Global capabilities. We offer customised HY solutions and Multi-Credit solutions via SMAs, mutual funds, UCITs, closed-end funds and comingled vehicles. For all HY opportunities, we seek to identify the most attractive risk-adjusted returns, utilising a large, experienced and global team of Portfolio Managers, analysts and traders based in London, New York and Boston.
The High Yield market features an asymmetric risk/return profile that can include incomplete information and elevated default risk. As such, we take an active management approach to High Yield bonds that centres on detailed fundamental credit research to identify idiosyncratic opportunities, employing disciplined underwriting and risk controls to help mitigate default risk and preserve principal. We overlay our bottom-up fundamental analysis with our views on broader macro themes to help migrate portfolio positioning to avoid growing external risks or to exploit new trends. Alcentra’s standing as one of the largest, global credit managers and integrated investment process provides us with certain information and sourcing advantages.
Alcentra has embedded a corporate social responsibility culture and recognises the validity and importance of ESG concerns. We believe that responsibly managed companies are better placed to gain a sustainable competitive advantage and provide strong long-term growth. As a result, the analysis of ESG risks and related issues form an integral part of the investment process and are assessed during the initial investment process and throughout the life of the investment.
Please contact us for further information on the strategy or on the Management Team.